...from the art and money virtuous cycle

Rudolf Stingel, Untitled—After Sam

Untitled—After Sam, oil painting, by NY based artist Rudolf Stingel, acquired by François Pinault, French luxury goods magnate and billionaire. This work may go on display at the Palazzo Grassi in Venice, recently bought by Mr Pinault to house his contemporary art collection. The gallery is scheduled to open in Spring 2006.

Internet(s) at crossroads

The current Internet, quintessential American contribution to the world, has become target, and possibly casualty, of those who challenge "hegemony," and support "multi-polarity," friends and foes of the U.S. alike.

Today, the Internet is ruled by Internet Corporation for Assigned Names and Numbers (ICANN). According to Webopedia, ICANN is a
nonprofit organization that has assumed the responsibility for IP address space allocation, protocol parameter assignment, domain name system management and root server system management functions previously performed under U.S. Government contract.
ICANN was created by the late Jon Postel in the fall of 1998 in response to a policy statement issued by the US Department of Commerce. This statement called for the formation of a private sector not-for-profit Internet stakeholder to administer policy for the Internet name and address system.
Thus far ICANN has taken various measures to oversee the domain-name registration system's transition from government hands to private hands and to coordinate its decentralization and the integration into a global community.
ICANN's diverse board consists of nineteen Directors, nine At-Large Directors, who serve one-year terms and will be succeeded by At-Large Directors elected by an at-large membership organization. None of the present interim directors may sit on the board once the permanent members are selected.

Gathered for the first time at the UN's World Summit on the Information Society (WSIS) in 2003 in Geneva, officials of several countries are pushing for an alternative to the current system of Internet governance--the management of the names, numbers, root servers, and standards. Brazil and South Africa are critical of the current system, China calls for a new international treaty organization. France too wants an intergovernmental approach. Things went as far as Zimbabwe's Robert Mugabe's calling the existing system of Internet governance a form of neocolonialism.

On June 2005, the efforts of several nations and organizations (e.g. U.N., E.U.), asking for a place at the Internet management table, led to a U.N. report calling not only for the US to give up control, but asking the United Nations to set broader Internet policy, including multi-lingualization of the Web and the power to tax domains to pay for universal access.

The reaction of the US government was, what Kenneth Neil Cukier calls it in the latest issue of Foreign Affairs, a Monroe Doctrine for our times: "U.S. Principles on the Internet’s Domain Name and Addressing System."

First, there are domain names, such as www.chircu.com or www.bbc.co.uk. Controlling the database of generic names ending with suffixes such as ".com," ".net," etc., as well as the designation of operators for two-letter country-code suffixes (such as ".uk," Great Britain), touch on the commercial, and respectively, political, aspects of domain names. When the U.S. Government asked ICANN to initiate the procedures leading to a new domain name for pornography Web sites, a new domain name, ".xxx," was proposed. However, following complaints from American Christian groups, the U.S. Department of Commerce removed its support for such a domain name. Moreover, when Taiwan was assigned the ".tw" suffix, under the current ICANN arrangement, China could not escalate its frustration with the event to a diplomatic scandal.

Second, there is the Internet Protocol addresses, 32-bit numeric address written as four numbers separated by period, that every Internet resource needs to work on the Internet. A crisis is already looming in this area. For historical reasons dating back in the late '70s the system is set up to accommodate about 4 billion potential IP addresses. Now, that everything needs to be on the Internet, the current IP address system needs to be updated before running out of unique IP's.

Third are what are called root servers. According to Webopedia, this is a
system of 13 file servers that are distributed around the globe and contain authoritative databases that form a master list of all top-level domain names (TLDs). There is one central, or "A", server that replicates changes to the other servers on a daily basis. Different organizations maintain the servers on the root server system.

In other words, the root servers are a control mechanism needed to make the domain name system work. For another historical reason, worldwide, there are only 13 root servers. To make matters even more delicate in a diverging world, ten of the root servers are operated from the U.S., and the rest from Holland, Sweden, and Japan.

Finally, there are technical standards that must be formalized and coordinated to ensure Internet interoperability. Standards are the engine propelling the Internet evolution.

All four Internet governance facets deal both with the politics and economics of the Internet. However, it is the fourth facet that has the greatest economical implications. For example, different standards may stop the growth of the major plumbers of the Internet, it so happens that most of them are US-based companies, while opening (smaller) worlds of opportunity to local players in, say, France, China, India, and Russia. This is not a new evolution, see the different standards in (wireless) telephony, space-based positioning systems, power grids, or even video-coding systems. The novelty here, if countries proceed with a non-US alternative to ICANN, may be in doing away with a system whose value consists of the ability one has to access data and applications from any Internet-connected device, regardless of the place where data, and applications, originate.

By mid-November 2005, WSIS will have worked on:
[...] a process of monitoring and evaluation of the progress of feasible actions laid out in the Geneva Plan and a concrete set of deliverables that must be achieved by the time the Summit meets again in Tunis in November 2005. Efforts are now being made to put the Plan of Action into motion and working groups are being set up to find solutions and reach agreements in the fields of Internet governance and financing mechanisms. These working groups will provide inputs to the second phase of WSIS in Tunis. Also, measures will be taken to bridge the digital divide and hasten the achievement of the Millennium Development Goals with the help of ICTs.

These being the facts, future scenarios about the internet(s) evolution are a necessity at places like the U.S. Government, Cisco, Juniper, Google, Yahoo, Oracle, Legend, Wipro, SAP, and so on. In addition, the U.S. Government should, and will, see what bargaining power it has left after March 2003. Even though the recent approval at UNESCO of the "Convention on the protection and promotion of the diversity of cultural expressions" doesn't give the full measure of the leverage the US Government still has in matters dealing with the Internet, it gives one no assurance for the long-term fate of the Internet.

One for you

Have you ever wondered why is it that those who say the truth around here are called comedians?

Business Responsibility vs. Business Responsibilities

Reason features an interesting 3-way conversation among Milton Friedman, Whole Foods’ John Mackey, and Cypress Semiconductor’s T.J. Rodgers: "Rethinking the Social Responsibility of Business." Departure point is a Friedman citation: The Social Responsibility of Business Is to Increase Its Profits.

John Mackey, the founder and CEO of Whole Foods, starts off by disagrying with Friedman. He believes the above citation is too narrow a description of his and many other businesses’ activities.

T.J. Rodgers, the founder and CEO of Cypress Semiconductor, counters Mackey's point(s) by arguing that corporations add far more to society by maximizing “long-term shareholder value” than they do by donating time and money to charity.

You may access the conversation at Reason online by clicking here. The first comment here is also my comment to the conversation.

Beethoven's Own Handwriting

J. WAKIN, in NYT, writes about the newest musical discovery, A Historic Discovery, in Beethoven's Own Hand


A look at the manuscript,[...], shows a composer working with abandon and fixated on getting it exactly right. Groups of measures are vigorously canceled out with crosshatches. There are smudges where Beethoven appears to have wiped away ink while it was still wet. Sections have "aus," or "out," scribbled over them.

In some parts, Beethoven pays little heed to spacing out the notes in a measure, extending the five-line staves with wobbly lines in his own hand. High notes soar above the staff. The handwriting grows agitated to match the music. His clefs are ill formed. In one place, he pastes an entire half-page over a botched section with red sealing wax.

In another spot, Beethoven puts in numbers to signify the fingering. "It's so touching," said Stephen Roe, a musicologist who is head of Sotheby's manuscript department. "It means he played it."

The manuscript is written on several different types of paper with a paper-covered board binding, apparently from the 1830's. The title has the word "fugue" misspelled as "tugue." Bound at the back is a first print edition.

The "Grosse Fuge" lies at the heart of an enduring Beethoven controversy.

It was composed, and published, as the finale of his Op. 130 String Quartet, a member of the colossal series of late quartets. But it was astonishingly complex. After the premiere on March 21, 1826, a reviewer called the music "incomprehensible, like Chinese" and suggested that Beethoven's deafness was at fault. Beethoven wrote another finale, lighter and more pastoral, and agreed to have the "Grosse Fuge" published separately.

Debate has raged over the Op. 130 quartet's proper finale. One camp says that since Beethoven himself made the decision, the substitute finale should be played. The other says that he was effectively pressured into the change by his friends and publisher, and that therefore the "Grosse Fuge" should remain.

Maynard Solomon, another Beethoven biographer, cautioned against overestimating the manuscript's value, pointing out that it is a piano transcription and thus a "secondary work." But, Mr. Solomon said, it fills a gap in the history of the "Grosse Fuge," which he called "one of the most important composition histories in Beethoven's life."

The publisher commissioned a four-hand piano version from another composer, but the job of teasing out the string lines and assigning them to the keyboard was so poorly done that Beethoven insisted on making his own version, which he delivered in August 1826. He was dead less than eight months later.

Describing the period of Beethoven's life, Mr. Lockwood, the Harvard musicologist, said: "He's sick. He is old in his way. He's tired. He's really near the end of his career. But he decides it's worth it to get this piece out in four hands in his own version. It's a labor of extreme love at the end of his life."

Beethoven could not comprehend why the work was not better received. When he was told the audience at the premiere called for encores of the middle movements, he was reported to have said: "And why didn't they encore the Fugue? That alone should have been repeated! Cattle! Asses!"

On a lighter (economical) note

  • Charge less, and it's unfair competition;
  • Charge more, and it's gouging;
  • Charge the same, and it's collusion!

Northern Europe Rules // The Price of Power

From the recently released 2005 Global Competitiveness Report, by the World Economic Forum (WEF), we learn the Finland tops the charts for the second consecutive year. The presence of several North-European countries in top ten disproves the thesis that high national tax rates obstruct countries from competing effectively in world markets, or from delivering to their respective populations some of the highest standards of living in the world. The Report is "suggesting that what is important is how well the government revenues are spent, rather than the tax burden per se."

The US continues to hold technological supremacy, and maintain the premiere pipeline of innovation in the world. The US companies are aggressive in adopting new technologies, and spend heavily on R&D. However, the US leadership in these areas is being moderated by its lower performance in other areas measured by the WEF composite index. Macroeconomic imbalances in the country, especially in the area of the public finances, keep the US on the second place. So, despite "overall technological supremacy" the US is downgraded by poor economic management and the perceived negative influence of business lobbies on government policy.

Global Competitive Index


2005 Rank
2004 Rank
Changes 2004-2005
United States

Source: http://www.weforum.org/

It's fund-raising time!

It is again time for the publicly funded, American TV and radio stations to ask for money. Under the guise of providing local programming, in this rational day and age, we have to put up with such quarterly rituals.

The problem I have with "local" programming is that, except for offering ample opportunities for few local egos, they would be an interesting idea. Culture comes especially in its garden variety. Voices and faces are few and the same. A better name for these media would be communally-funded schemes of full-employment.

Today, unless one lives in one of the top FIVE metropolitan areas, chances are that most worth watching, and tuning in to, materials are not local. This situation makes, for the educated consumer of media, a very parochial landscape. There could not even be a comparison between our public media and the likes of BBC, ARTE, Canal+, Pro7. Moreover, when was the last time you watched a non-American/British film on PBS? Not even one from the Sundance Film Festival?

As alternative, I suggest that all the locally raised funds be pooled by NPR and PBS, which, in turn, can allocate them more efficiently. The result should consist of more programming and variety, higher quality programming (i.e culture and education), and fewer re-runs. Even in comparison to developing countries, the average American consumer of public media gets programming in less quantity, and of lower quality.

By pooling resources, the US public media could achieve higher levels in consumers satisfaction. For example, PBS could develop content for several channels, each channel targeting a major demographic. The classical music radio programming could also gain from consolidation by allocating adequate resources for interviews and music education. The American consumers of media would have more access to meaningful and real variety, not the current "variety" each category of media consumer gets so little of it.

On future & dollar

The future, the only currency that mattered more than the dollar...

Salman Rushdie, Shalimar The Clown

Keep some behind closed doors, in those corporate board-rooms!

Jack Welch, this fin-de-siècle icon of business management, has made some public appearances since he left the top position at GE. Unfortunately or not, most of these outings were revelatory of softer spots of a well clad person(a). Indeed, the details about his divorce, his efforts to put out some books (i.e. apologies for golf and tennis key-words, -people, -places), or his op-ed pieces, make for a portrait of a man who despite age is still lacking.

His most recent op-ed, The Five Stages of Crisis Management - Why Katrina will make us stronger, came out in WSJ-OpinionJournal on 09/14/2005. Mr. Welch takes five generic stages of crisis management and instantiates them, afterwards, to the events surrounding the Katrina catastrophe.

The first stage of that pattern is denial. The problem isn't that bad, the thinking usually goes, it can't be, because bad things don't happen here, to us. The second is containment. This is the stage where people, including perfectly capable leaders, try to make the problem disappear by giving it to someone else to solve. The third stage is shame-mongering, in which all parties with a stake in the problem enter into a frantic dance of self-defense, assigning blame and claiming credit. Fourth comes blood on the floor. In just about every crisis, a high profile person pays with his job, and sometimes he takes a crowd with him. In the fifth and final stage, the crisis gets fixed and, despite prophesies of permanent doom, life goes on, usually for the better.

The question now becomes: If it takes a PhD, top CEO of all times, and man in his old age, to come up with such writings at these moments, what is being left for the college student looking to score well on his/her homework? Probably, somebody should tell Jack it's high time he moved on!

On a larger scheme of things, it is quite astounding to reckon the price of success or how incomplete personalities success (of any type?) produces...

Very-long term view

One of our jobs is to optimize the surplus that we pass on, but not necessarily maximize it. I suppose the difference that I would put between optimization and maximization is a very-long term view.

Tony Hughes, financial director of All England Club, a private members club

Considering the health of an organization, it is imperative that its employees/resources be happy and not only its executives, customers, and shareholders. Hence the long term view on the life of a business. Should one think that long-termism is an exclusive feature of private concerns?


06/01/05, Stanford CA

"I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.

The first story is about connecting the dots.
I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out? It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college. And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting. It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example: Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating. None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it's likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later. Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.
I was lucky - I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation - the Macintosh - a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating. I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me - I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over. I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life. During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I retuned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together. I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

My third story is about death.
When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something. Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything - all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart. About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes. I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now. This was the closest I've been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept: No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true. Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking.

Don't let the noise of other's opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary. When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and Polaroid cameras.

It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions. Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you. Stay Hungry. Stay Foolish. Thank you all very much."

There is hope...

Beethoven (1.4m) beats Bono (20,000) in battle of the internet downloads

Music industry forced to take note as composer's complete symphonies outshine rock acts in online chart

Charlotte Higgins, arts correspondent
Thursday July 21, 2005
The Guardian

Forget Coldplay and James Blunt. Forget even Sgt Pepper's Lonely Hearts Club Band, which, in the version performed at Live8 by Sir Paul McCartney and U2, has become the fastest online-selling song ever. Beethoven has routed the lot of them.

Final figures from the BBC show that the complete Beethoven symphonies on its website were downloaded 1.4m times, with individual works downloaded between 89,000 and 220,000 times. The works were each available for a week, in two tranches, in June.

Sgt Pepper could well end up as the best-selling online track of all time. But its sales figure of just 20,000 online in the two weeks since it has been available contrasts poorly with the admittedly free Beethoven symphonies. (Sgt Pepper cost 79p on the iTunes website.)

To put another perspective on the success of the Beethoven downloads, according to Matthew Cosgrove, director of Warner Classics, it would take a commercial CD recording of the complete Beethoven symphonies "upwards of five years" to sell as many downloads as were shifted from the BBC website in two weeks. The BBC has been stunned by the response - so much so that its director general, Mark Thompson, opened his annual report with Beethoven's inscription on the score of the Missa Solemnis: "From the heart ... May it go again to the heart!"

Click here for the whole article in The Guardian

On science and religion

Undertaking an exercise of representation at micro-, and macro-physical levels, where n-dimensional string theory (n > 10) turns everything into swarming energies, makes one think of the day modern science will be looked on very much the same way religion is today.

Hasn't religion held predictive and explanatory powers? Haven't religion's metaphors piled on top of each other, giving way to newer and more faithful representations meant to rescue religion from increasing contradictions? Not unlike science, where, for example, swarming energies came on top of swarming probabilities.

What a bemusing scene would make for the contemporary scientist to see some citizen of the 3-rd millennium looking back on our science...


"It's Stupid to be Afraid"
Singapore's first-ever prime minister, long-time government head and current political mentor Lee Kuan Yew talks about Asia's rise to economic power, China's ambitions and the West's chances of staying competitive.

SPIEGEL: The political and economic center of gravity is moving from the West towards the East. Is Asia becoming the dominant political and economic force in this century?

Mr. Lee: I wouldn't say it's the dominant force. What is gradually happening is the restoration of the world balance to what it was in the early 19th century or late 18th century when China and India together were responsible for more than 40 percent of world GDP. With those two countries becoming part of the globalized trading world, they are going to go back to approximately the level of world GDP that they previously occupied. But that doesn't make them the superpowers of the world.

SPIEGEL: Their leading politicians have publicly discussed the so-called "Asian Century".

Mr. Lee: Yes, economically, there will be a shift to the Pacific from the Atlantic Ocean and you can already see that in the shipping volumes of Chinese ports. Every shipping line is trying to get into association with a Chinese container port. India is slower because their infrastructure is still to be completed. But I think they will join in the race, build roads, bridges, airports, container ports and they'll become a manufacturing hub. Raw materials go in, finished goods go out.

SPIEGEL: How afraid should the West be?

Mr. Lee: It's stupid to be afraid. It's going to happen. I console myself this way. Suppose, China had never gone communist in 1949, suppose the Nationalist government had worked with the Americans -- China would be the great power in Asia -- not Japan, not Korea, not Hong Kong, not Singapore. Because China isolated itself, development took place on the periphery of Asia first.

SPIEGEL: Such a consolation won't be enough for the future.

Mr. Lee: Right. In 50 years I see China, Korea and Japan at the high-tech end of the value chain. Look at the numbers and quality of the engineers and scientists they produce and you know that this is where the R&D will be done. The Chinese have a space programme, they're going to put a man on the Moon and nobody sold them that technology. We have to face that. But you should not be afraid of that. You are leading in many fields which they cannot catch up with for many years, many decades. In pharmaceuticals, I don't see them catching up with the Germans for a long time.

SPIEGEL: That wouldn't feed anybody who works for Opel, would it?

Mr. Lee: A motor car is a commodity -- four wheels, a chassis, a motor. You can have modifications up and down, but it remains a commodity, and the Chinese can do commodities.

Mr. Lee: I faced this problem myself. Every year, our unions and the Labour Department subsidize trips to China and India. We tell the participants: Don't just look at the Great Wall but go to the factories and ask, "What are you paid?" What hours do you work?" And they come back shell-shocked. The Chinese had perestroika first, then glasnost. That's where the Russians made their mistake.

SPIEGEL: The Chinese Government is promoting the peaceful rise of China. Do you believe them?

Mr. Lee: Yes, I do, with one reservation. I think they have calculated that they need 30 to 40 -- maybe 50 years of peace and quiet to catch up, to build up their system, change it from the communist system to the market system. They must avoid the mistakes made by Germany and Japan. Their competition for power, influence and resources led in the last century to two terrible wars.

SPIEGEL: What should the Chinese do differently?

Mr. Lee: They will trade, they will not demand, "This is my sphere of influence, you keep out". America goes to South America and they also go to South America. Brazil has now put aside an area as big as the state of Massachusetts to grow soya beans for China. They are going to Sudan and Venezuela for oil because the Venezuelan President doesn't like America. They are going to Iran for oil and gas. So, they are not asking for a military contest for power, but for an economic competition.

SPIEGEL: What are your reservations?

Mr. Lee: I don't know whether the next generation will stay on this course. After 15 or 20 years they may feel their muscles are very powerful. We know the mind of the leaders but the mood of the people on the ground is another matter. Because there's no more communist ideology to hold the people together, the ground is now galvanised by Chinese patriotism and nationalism. Look at the anti-Japanese demonstrations.

SPIEGEL: How do you explain that China is spending billions on military modernisation right now?

Mr. Lee: Their modernisation is just a drop in the ocean. Their objective is to raise the level of damage they can deliver to the Americans if they intervene in Taiwan. Their objective is not to defeat the Americans, which they cannot do. They know they will be defeated. They want to weaken the American resolve to intervene. That is their objective, but they do not want to attack Taiwan.

SPIEGEL: Many Americans fear that China and the US are bound to become strategic rivals. Will this become the great rivalry of the 21st century?

Mr. Lee: Rivals, yes, but not necessarily enemies. The Chinese have spent a lot of energy and time to make sure that their periphery is friendly to them. So, they settled with Russia, they have settled with India. They're going to have a free trade agreement with India -- they're learning from each other. Instead of quarrelling with the Philippines and the Vietnamese over oil in the South China Sea, they have agreed on joint exploration and sharing. They've agreed on a strategic agreement with Indonesia for bilateral trade and technology.

SPIEGEL: But the Americans are trying to encircle China. They have won new bases in Central Asia.

Mr. Lee: The Chinese are very conscious of being encircled by allies of America. But they are very good in countering those moves. South Korea today has the largest number of foreign students in China. They see their future in China. So, the only country that's openly on America's side is Japan. All the others are either neutral or friendly to China.

Panta Rhei or A Tale of Passage

On July 12, NYTimes published the following op-ed piece, authored by SUKETU MEHTA. Among the increasing tide of discussions about globalization/délocalisation, Mr. Mehta's piece distinguishes itself by offering a view of the entity at the receiving end of the conversation. As far as the condition of a certain immigrant is concerned, the reader never learns where the "passage" ends, if it ever does. However, the American reader is reminded that the U.S. education system needs improvement, and so does trade between the U.S. and India.
A Passage From India

A Passage From India

ACCORDING to a confidential memorandum, I.B.M. is cutting 13,000 jobs in the United States and in Europe and creating 14,000 jobs in India. From 2000 to 2015, an estimated three million American jobs will have been outsourced; one in 10 technology jobs will leave these shores by the end of this year. Stories like these have aroused a primal fear in the Western public: that they might soon need to line up outside the Indian Embassy for work visas and their children will have to learn Hindi.

Just as my parents had to line up outside the American consulate in Bombay, and my sisters and I had to learn English. My father came to America in 1977 not for its political freedoms or its way of life, but for the hope of a better economic future for his children. My grandfathers on both sides left rural Gujarat in northwestern India to find work: one to Calcutta, which was even more remote in those days than New York is from Bombay now; and the other to Nairobi. Mobility, we have always known, is survival. Now I face the possibility that my children, when they grow up, will find their jobs outsourced to the very country their grandfather left to pursue economic opportunity.

The outsourcing debate seems to have mutated into a contest between the country of my birth and the country of my nationality. Of course I feel a loyalty to America: it gave my parents a new life and my sons were born here. I have a vested interest in seeing America prosper. But I am here because the country of my ancestors didn't understand the changing world; it couldn't change its technology and its philosophy and its notions of social mobility fast enough to fight off the European colonists, who won not so much with the might of advanced weaponry as with the clear logical philosophy of the Enlightenment. Their systems of thinking conquered our own. So, since independence, Indians have had to learn; we have had to slog for long hours in the classroom while the children of other countries went out to play.

When I moved to Queens, in New York City, at the age of 14, I found myself, for the first time in my life, considered good at math. In Bombay, math was my worst subject, and I regularly found my place near the bottom of the class rankings in that rigorous subject. But in my American school, so low were their standards that I was - to my parents' disbelief - near the top of the class. It was the same in English and, unexpectedly, in American history, for my school in Bombay included a detailed study of the American Revolution. My American school curriculum had, of course, almost nothing on the subcontinent's freedom struggle. I was mercilessly bullied during the 1979-80 hostage crisis, because my classmates couldn't tell the difference between Iran and India. If I were now to move with my family to India, my children - who go to one of the best private schools in New York - would have to take remedial math and science courses to get into a good school in Bombay.

Of course, India's no wonderland. It might soon have the world's biggest middle class, but it also has the world's largest underclass. A quarter of its one billion people live below the poverty line, 40 percent are illiterate, and the child malnutrition rate exceeds that of sub-Saharan Africa. There's a huge difference between the backwater state of Bihar and the boomtown of Bangalore. Those Indians who went to the United States, though, have done remarkably well: Indians make up one of the richest ethnic groups in this country. During the technology boom of the late 1990's, Indians were responsible for 10 percent of all the start-ups in Silicon Valley. And in this year's national spelling bee, the top four contestants were of South Asian origin.

There is a perverse hypocrisy about the whole jobs debate, especially in Europe. The colonial powers invaded countries like India and China, pillaged them of their treasures and commodities and made sure their industries weren't allowed to develop, so they would stay impoverished and unable to compete. Then the imperialists complained when the destitute people of the former colonies came to their shores to clean their toilets and dig their sewers; they complained when later generations came to earn high wages as doctors and engineers; and now they're complaining when their jobs are being lost to children of the empire who are working harder than they are. My grandfather was once confronted by an elderly Englishman in a London park who asked, "Why are you here?" My grandfather responded, "We are the creditors." We are here because you were there.

The rich countries can't have it both ways. They can't provide huge subsidies for their agricultural conglomerates and complain when Indians who can't make a living on their farms then go to the cities and study computers and take away their jobs. Why are Indians willing to write code for a tenth of what Americans make for the same work? It's not by choice; it's because they're still struggling to stand on their feet after 200 years of colonial rule. The day will soon come when Indian companies will find that it's cheaper to hire computer programmers in Sri Lanka, and then it's there that the Indian jobs will go.

Of course, it's heart-wrenching to see American programmers - many of whom are of Indian origin - lose their jobs and have to worry about how they'll pay the mortgage. But they are ill served by politicians who promise to bring their jobs back by the facile tactic of banning them from leaving. This strategy will ensure only that our schools stay terrible; it'll be an entire country run like the dairy industry, feasible only because of price controls and subsidies.

But we have a resource of incalculable worth right here to help us compete: the immigrants who've been given a new life in America. There are many more Indians in the United States than there are Americans in India. Indian-Americans will help America understand India, trade with it to our mutual benefit. Just as Arab-Americans can help us fight Al Qaeda, Indian-Americans can help us deal with the emerging economic superpower that is India. This is the return of the gift of citizenship.

And just in case, I'm making sure my children learn Hindi.

Is globalization enough carrot for staus qvo?

For those visiting contemporary Greece, it may become apparent that the height of a civilization is no guarantee in and of itself for how long that civilization lasts.

For some time now, more precisely since the collapse of the Soviet Union, we have been dealing with increased anxiety regarding the course of our society. For now, clustering economies and trading blocs seem to emerge as part of a first stage in the opposition to a "uni-polar" world. Military re-arrangements on the geo-strategic map do not seem to be too far off either. The public can now see in the EU arms-trading overtures to China what has probably been in the minds of military chiefs of staffs for some time.

Contrary to all this, it seems, runs globalization with its powerful advocates and mighty interests. It is commonplace observation to notice how the tide of globalization raises most nation-boats. The temptation is to say that there is too much interest in globalization and free trade for anybody to run contrary to it. Moreover, there is too much to be lost by all players would the current global system collapse or come under threat.

So, in such a world run by so many accumulating contradictions, where is one to find the equivalent to a visit to Greece? In Sinking Globalization, an article published with Foreign Affairs, March/April 2005, Niall Ferguson gives the reader a comparative reading of the history. This may help one realize that there were times in the past when players, well-informed of the cost of war/collapsing global systems, could not avoid the unimaginable losses of letting the hell break loose. So, history tells us, through the voice of Niall Ferguson, that bad things can happen despite our having either a huge vested interest in status qvo OR the potential for huge losses.

Here is Foreign Affairs' summary of Niall Ferguson's article:
"Could globalization collapse? It may seem unlikely today. Yet despite many warnings, people were shocked the last time globalization crumbled, with the onslaught of World War I. Like today, that period was marked by imperial overstretch, great-power rivalry, unstable alliances, rogue regimes, and terrorist organizations. And the world is no better prepared for calamity now."

Drucker on the course of (some) things to come

Many a time, when analyzing the future, we see the various macro-trends that would place an industry, economy, nation or bloc of nations, on a competitive map zig-zagging beyond our ability for classification and sense-making.

Peter Drucker, this thinker whose output resists classifications, shows us his version for the near-term future in an interesting piece, 'Trading Places,' published with The National Interest. His attempt is made interesting by its multi-dimensional scope of analysis. On one hand, Drucker looks at several key sectors of our economies, and on the other, by leveraging an acute sense of time, traces his points deep into history.

Here is the gist of his analysis:
"The New world economy is fundamentally different from that of the fifty years following World War II. The United States may well remain the political and military leader for decades to come. It is likely also to remain the world's richest and most productive national economy for a long time (though the European Union as a whole is both larger and more productive). But the U.S. economy is no longer the single dominant economy.

The emerging world economy is a pluralist one, with a substantial number of economic "blocs." Eventually there may be six or seven blocs, of which the U.S.-dominated NAFTA is likely to be only one, coexisting and competing with the European Union (EU), MERCOSUR in Latin America, ASEAN in the Far East, and nation-states that are blocs by themselves, China and India. These blocs are neither "free trade" nor "protectionist", but both at the same time.

Even more novel is that what is emerging is not one but four world economies: a world economy of information; of money; of multinationals (one no longer dominated by American enterprises); and a mercantilist world economy of goods, services and trade. These world economies overlap and interact with one another. But each is distinct with different members, a different scope, different values and different institutions."

What now, what next?

The US dollar goes lower while the oil price goes higher, and so do the US government's expenses. What if the latest surge in demand from US consumers indicates a problem whose solution is structural, unspoken of, and only marginally addressed by most current debates around oil, currency valuations, and such? Is the world economy viewed, by the handlers of capital, as a fixed pie whose growth comes mostly through increased asset prices, especially in the developed world? What if, by lacking the capability to manufacture most goods it needs, matters in the US can only worsen unless... it rebuilds its manufacturing capabilities? How likely a scenario would this be and what would the markers be along its timeframe?

Alan Greenspan still holds a card or two, and so does the President...

Nouriel Roubini takes issue with Alan Greenspan. According to him, Mr. Greenspan's decision to support President Bush's tax cuts was a great, if not the greatest, mistake the Fed Chairman has made.

What I would add is that Mr. Greenspan started making such 'errors' a while back, and one should not ignore the support he lent to President Clinton's economic policies.

Given all these, how safe is it to assume that Mr. Greenspan traded in his institution's independence for longevity? On a different level, how much independence can go against an elected president's economic agenda? I would posit, not much if the Fed were alone against the executive branch.

For the original posting on Mr. Roubini's site, follow this link: What did the Delphic Oracle mean on the current account? Reading Greenspan's Tea Leaves. And a modest appeal to the Chairman to speak up on our reckless fiscal policy.

Collaboration as result of a prisonner trilemma

Nouriel Roubini proposes an interesting framework to approach the current situation in the global financial markets.

Can we think of Bretton Woods 2 as a Prisoners Dilemma Nash Game between the US and China? Certainly Larry Summers referred to it as a "balance of financial terror" game. So, will the outcome be cooperation for global rebalancing or hard landing mutually assured financial destruction, i.e. MAD or MAFD?

I would only add that we deal in fact with a trilemma, add EU to the two entities considered by Mr. Roubini. As well, collaboration for an exit out of the status qvo is more than necessary. This means that all parties, including the US, have to change the rules of the game. Hence the need for a Bretton Woods 3. For a link to the initial posting and the ensuing conversation, follow this: US-China "Balance of Financial Terror" Game. A Prisoners Dilemma Game: hard landing MAD or Chinese pre-emption as the likely solution?

Merck is back

Hats off to Mr. Gilmartin, Merck's CEO and member in Microsoft's Board of Directors! He might not embody everyone's idea of the contemporary CEO yet having the guts to pull Vioxx off the drug market was the right thing to do. With the tort law reform atmosphere in Washington, an ageing population in the developed world, more access to medical services in the developing world, and its own cash pile, Merck has almost what it takes to consider its next steps.

The jury is still out on the fruits of Merck's marketing arrangements with its partners. Novartis might have just signaled what it takes to ride the next wave in pharma: generics. Whether or not more generics is what Merck needs to get out of the current conundrum, the Company and Mr. Gilmartin himself ought to decide who the top guy is.

The Challenge of Globalization?

Internet Café, Cairo - Egypt

On globalization

It would be arbitrary to point out any one moment in the history of trade as the beginning of globalization. Certainly, there have been many times the world could have taken all free trade one would throw at it! That's not so anymore--at least from the perspective of the West. In the developing world, without intellectual property protection, and markets open to services from the developed world, globalization as we've known it for a decade or so is not sustainable. On the other hand, without strong education in the developed world, globalization is again unsustainable. Education in this context should be taken in its broadest scope, from elementary to college, and to job (re-)training.

Unlike in the past, technological advance permeates more quickly in the developing world. Strong property rights, IP included, at least would make the process fairer for those who pay the higher and higher R&D bills in the developing world. On the other hand, opening markets to services in the developing world could keep the money flowing both ways for a while. Until regional (capital) markets can supplant the inflows from the developed world, growth in the developing world remains uncertain. As well, the developed world needs to re-think its commitment to education. The post-industrial economy is at crossroads. Social expenditure rises regardless of how well the society leverages its human resources. Post industrial economies will run out of options unless they are able to make the most out of their human capital. Education is one of the keys to turning the human potential on.

The bring the conversation closer to the US shores, NAFTA was probably the beginning of the last wave of globalization. Then, a strong dollar (mid 90's Clinton-Rubin) and a relaxing and non-military expanding world fuelled global trade to unprecedented levels. Meanwhile, one of the most difficult barriers to growth has grown even higher: shortage of highly skilled labor. Just ask Microsoft why it lags behind most all deadlines it set publicly for itself. Immigration alone has not solved the problem and, probably, it won't. In the late 90's, the ever smaller manufacturing base had been weakened even further by fiscal policies meant to solve a problem in the high-tech sector--increasing short term rates and high dollar valuations. The social costs are only growing, but at least there is hope the current public conversation will get us somewhere. At least now, education is still missing from the public debate. The fiscal policies would have been be just the right vitamin--lower dollar and such--had it not been for the increasing cost of the war(s) and more expensive oil. All in all, it is only a crisis that can bring out the best in us, sometimes...

J. M. Keynes, economist

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood...
Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.

"...fear has become the emotion through which public life is administred"

Joanna Bourke, writer

Blogs are free enterprise capitalist expressions of communication

The day when the number of blogs equals the number of people in the US cannot be too far. Mainstream media, activist groups, corporations, and countless numbers of individuals and entities, are evaluating this medium trying to make the most out of it before (too) late. It's a blog-rush out there!

Following, let us take a look at some of the comparative-, and intrinsic-success factors for the blogs.

Arguably, the newsgroup is the predecessor of the blog. Newsgroups are still very popular forms of individual expression within the larger context of social-networks. So, everything we've come to know about social networks applies to newsgroups. On the advantages side, newsgroups enjoy the network effects/externality: the value of the newsgroup, to each one of its members, is the square of the number of members. On the costs side, newsgroups suffer from the tragedy of commons: rationally or not, each member of the newsgroup tries to maximize her own gain/utility function, which, at the limit, occurs when that member makes no contribution to the newsgroup. Things can get even worse when a newsgroup member's contribution is to flame the group--post a message that in essence destroys value for the other members of the group. Flaming has been addressed relatively well by introducing editorship/mediators. So, edited/moderated newsgroups tend to be of more value for their members. Also on the costs side, newsgroup membership comes usually on the cost of an email account, and requires the skills to handle email and a web browser.

Blogs could possibly be extended to embrace all characteristics of newsgroups while enjoying its own strengths as well. A blog could have more contributors besides its owner, and comes for about the same skill/fee prerequisites of newsgroups. Unlike a newsgroup, blogs are open to everybody to see, but not necessarily to comment. It is the intrinsic features/strengths blogs have that may address the costs associated with newsgroups. A blog's owner is the default editor of the blog, so blogs could become moderated fora. Then, a blog enables its owner(s) to build a mix of financial and moral capital, and it also allows its owner(s) to draw against the same capital. Let us examine the power of this statement: a blog allows you and me to build brand equity around our names/skill sets, monetize the equity we built, and it even provides the mechanics of using some of the capital we created. One can see how the blog solves a great deal of the tragedy of commons problem--through an old CATO Institute-like recipe, privatization. Thus, the title of my posting...


How do I know where to go for my questions? Possible solutions: emerging hierarchies, blog-aggregators, co-optation by newspapers, Darwinian selection, directories, word of mouth, search-engine rankings...

Growth Scenarios:

For most of us, blogs will be just another way to store digitally our trivia. For as long as key-word advertising is the major game in the advertising world,nothing targets an ad better than a text-search. This means I'll be able to save my daughter's graduation pictures as a service provided to me by, let us say, Google. As another category, we'll witness the emergence of independent online anchors--not all talented people (can) fit in the newsrooms of the world. And, a third category could well be the ad-hoc reporters in some sore spot on the planet.

Thank you for your comments, and happy blogging!

Cheap does not supplant Quality

I drove for 1/2 hour to Wal-Mart to buy a set of windshield wiper-blades only to find that the type I needed was out of stock. Is it a unique experience?

Have you also been bothered by the fan of your Dell laptop blowing hot air on your (right) hand-wrist as you were handling your mouse?

Beyond the fact that both types of customer dissatisfaction come from icons of our economy, is there anything else these companies share? Of course, they are both representatives, each in its own industry, of the transformational nature of technology and ensued operational efficiencies.

Wal-Mart, by operating a just-in-time supply chain, and Dell, by manufacturing-to-order, have managed to be the most efficient organizations in their given industries. The common knowledge goes on to say that the customer gets the benefits (read savings) when dealing with anyone of these two. Yet, driving twice to the same store to get wiper blades more than doubles my cost, and taking all the heat from a poorly placed fan is all I remember when the lower price I paid for the laptop is forgotten.

So, when you have a long supply chain, long in weeks and miles, or when you change suppliers of your parts every now and then, "to keep them honest," it becomes easy to overlook 'subtleties' in your service/product like the ones above.

To the extent these are not isolated occurrences, what can drive such organizations back to consider quality of service/product?

Could there be anything like a customer revolution or are we in a race to the bottom?

Juran saw the problem with quality (too) many decades back... Somehow, had he had mostly Japanese and European students?

Addendum: The minimalist approach throughout!
Ikea makes an interesting case study: Not the greatest service on the floor, several items out of stock unless shopping on the first floor or the warehouse, one's shopping experience is more like a crawl than a flow. Yet, Ikea manages somehow to offer simple lines / functional furniture, an entry level to Scandinavian design (as far as price and quality,) that is still popular with shoppers for the lack of alternatives. In the end, the model behind Ikea's success is keep it minimalist (assembly, features, price, logistics, etc.) The only exception from minimalism seems to be its global scale.

To understand the difficulty through which change comes about, at a macro-level, it's worth recalling how Thomas Kuhn used to say that mere disconfirmation or challenge never dislodges a dominant paradigm; only a better alternative does.

From Wired 13.02: Revenge of the Right Brain

Wired 13.02: Revenge of the Right Brain

Daniel H. Pink is quick to reach the conclusion that "In a world upended by outsourcing, deluged with data, and choked with choices, the abilities that matter most are now closer in spirit to the specialties of the right hemisphere - artistry, empathy, seeing the big picture, and pursuing the transcendent. [...] "The causes: Asia, automation, and abundance."

Trying to add a historical dimension of unavoidability to his argument, the author then goes on to identify similarities between his announced transformation of coveted abilities and other(s) in the past--i.e. from physical strength or manual skill to the so called left-brain knowledge workers'.

Mr. Pink, let me acknowledge that the current Western society has incorporated so much intelligence in everything that surrounds its members that even an average-skilled person can operate more than satisfactorily in this society. The problem, you see, is relative to the sustainability of the status-qvo. On one hand, one gets less and less schooled in those left-brain competencies--due to personal-, and systemic-choices. On the other, the type of problems that take most effort to solve require left-brain type of competencies. If we in the US, and elsewhere in the Western world, decide to cultivate the right-brain abilities, at the expense of the left-brain ones, we may hope to achieve a more harmonious society indeed. It is unsure though we'll manage to keep it away from bankruptcy--financial and otherwise.

Just because knowledge may be cheaper elsewhere doesn't mean one has to abandon it for knowledge is power. And it was precisely the power of knowledge that took civilizations up and down, and on, and on. As well, today's value of the green buck is no guarantee in and of itself for its future performance. I think today's value has more to do with those who built it yesterday, and global accounting idiosyncrasies, than with the strength of a society as prophesized by Mr. Pink. Luckily, Grove, Gates, Immelt, and even Orin Hatch, see the future otherwise...

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